I have talked about bear market rallies and that these bear market rallies can be huge. They all have one thing in common, complete 100% retracement of the entire "C" wave. The entire "C" waves themselves can be a diagonal or ending diagonal, which the book labels as , ABC1, ABC2, ABC3, ABC4 and the last wave as a "ABC5". Diagonals are found most frequently in two places, and that is in any 5th wave, and in any "C" wave or part of any "C" wave. We can also have a leading 5 wave diagonal into a "A" wave which is not that common.
Many wave counters just label these waves using a normal impulse way of counting, but this does not help us in defining where we are in the sequence.
Ending diagonals always produce a 4th wave that dips into the second wave which breaks a cardinal rule as a Impulse. A normal diagonal 4th wave does not always dip into the second wave when a market is very strong. The XAU and HUI wave counts show this can happen. The XAU decline in 2008 and the HUI decline produced two different wave counts, but in reality they are both the same. The bull market from 2001 to 2011 in silver was all a "C Wave bull market" confirmed by the XAU.
I shorten these wave counts to just, C1,C2, C3, C4, and C5, With the number "always" being the higher degree. The above would be a Minor degree wave count with the "C" being one degree lower in Minute degree. If the entire move was one degree higher in Intermediate degree, then I would use (C1),(C2), (C3), (C4), and (C5) as my labeling.
This is a example of a C wave bull market which started with a "B" wave bottom in Intermediate degree and can even create a double zigzag for wave three. Here I show my c wave 5 waves as "ABC1" etc....
This I will shorten to "C1" etc... labeling. Since 2011 the DJIA has create such a ending diagonal. All diagonals contain zigzags with wave 4 crashes can contain a stretched zigzag. Also the last 5th wave in a ending diagonal can be rather massive and explosive. This usually happens just before a market crash.
The last thing I would want to make a mistake with, is calling a C Wave bull market a pure impulse, and forcing it into a super bull market. Every major wave counter today has identified the silver market as a super bull market that can send silver to 100's of dollars when in fact it will do no such thing but crash with a complete 100% retracement. Using the "C1" designation always reminds us that we are in a C wave, and gets away from trying to force a big bear market rally into a pure impulse. Even on a smaller scale a "C" wave rally can be awesome as they can be powerful and fast moves.
Here is a normal inverted "ABC" zigzag and it is only the "C" wave that I call a "C" wave bull market. These "C" waves do not make nice pretty waves as shown, but end with ending diagonals. Bare minimum the entire c wave gets retraced and most always the entire A wave as well producing a market crash.
Here is my older version of a diagonal in the 5th wave position, which can easily be mistaken for a running triangle 4th wave.
Updated June, 18, 2013
I have shown you one version of a idealized diagonal, and here I can show you another. This is the basic script that I am using inside a diagonal where wave three does not dip into wave 2. I will label them like this as much as possible, and when you see this you will know that I am working a diagonal.
This wave count is made out specifically for a Cycle degree diagonal 5th wave. Since I extended many times in the past, all that work tells me that we should be in Cycle degree. I have always had the commodities in Cycle degree and these Cycle degree diagonal 5th waves are common, and they can explain most all of the choppy bull markets. They are loaded with zigzag activity, and many times resemble a bad excuse for an impulse. All the times I have mentioned "broken impulse" waves, well these are it. They are called diagonals and name wise, extended diagonal sounds good. Diagonals are found most always in any 5th wave or any c wave locations.
I am currently working 5 diagonal 5th waves in Cycle degree and finding more as I get better at finding them.
Some of the core ones like the USD,EURO,GOLD,SILVER,OIL,YEN, are good starters. I know there are many more but market action has to clear them up some more. If I find a group of 8 over time, and they are all growing diagonal 5th waves in Cycle degree, then this core group is telling me that Cycle degree wave counting will come to a end. I think it is important to label all these waves identifying them as diagonals as it helps to identify where we are in the bigger picture.
It is very important to never use "WXYZ" wave counting in any diagonal because there is no specific way to tell the different between a zigzag "W" wave or a flat "W" wave. Also the book does not use any "WXY" waves inside a diagonal.